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Forget what you’ve been told by your parents. Talking about money is not taboo.
Quite the opposite, in fact. Talking about money and updating your understanding of common financial practices is “incredibly important,” Chelsea Ransom-Cooper, a certified financial planner and director of financial planning at Zenith Wealth Partners, tells CNBC Make It.
“Take the accountability to really try to educate yourself,” she says. “The more access to financial education and advice people have, they will have a higher likelihood of doing well and feeling confident when it comes to their finances.”
For young professionals new to the workforce — particularly recent college graduates — here are four common money myths that have been passed down through generations, debunked.
Myth No. 1: A six-figure salary will buy you happiness
Will $100,000 bring immediate happiness? “That’s not the case,” Ransom-Cooper says.
No set figure ensures happiness for working professionals, she says. Making six figures is not a recipe for automatic success or a solution to all of your problems, despite what you might have heard from your parents.
“Families say you need to make X amount of dollars to be happy — traditionally like $100,000,” Ransom-Cooper says. “Unfortunately, we know people who do make that amount and still aren’t happy due to inflation.”
“There isn’t a fixed amount of money that will bring you joy,” she adds.
Instead of focusing on a dollar amount, reflect on career goals and values that will lead to greater quality of life, Ransom-Cooper says.
Myth No. 2: Investing is only for the rich and debt-free
The idea that investing is only for the rich is antiquated, Ransom-Cooper says. Similarly, she adds, it is not necessary to pay off all of your debt before you start investing.
These misconceptions can deter young professionals from maximizing opportunities to grow their money. The idea has likely inhibited women and people of color in particular from being confident about investing, Ransom-Cooper says.
In 2020, only 55% of Black Americans were investors, compared with 71% of white Americans, according to the 2022 Ariel-Schwab Black Investor Survey. The gap has begun to close, though, with 58% of Black Americans investing in 2022, compared with 63% of white Americans.
Through education and discussion, investing can seem more feasible for young professionals, Ransom-Cooper says. What’s more, young professionals do not have to wait until their student loans or other outstanding debt is completely paid off to begin. “Compound growth is the most important thing,” she says.
When it comes to investing, the earlier you start, the better, even if you’re only able to put away $20 or $50 a month. An easy way for young people to begin is through a workplace 401(k) plan or a Roth IRA.
Myth No. 3: The only way to build wealth is by buying a home
“I hear it all the time with my clients. I’ll ask them: ‘Why do you want to buy a house?’ They’ll say: ‘I don’t know, my parents just told me I should have a house.'”
Rather than purchasing a home just to check a box on a parent’s ‘how to be wealthy’ checklist, Ransom-Cooper encourages young professionals to “know what is their personal strategy, and what makes the most sense for them.”
Investing early and growing your retirement savings, for example, are valuable ways to build wealth outside of the real estate market.
Myth No. 4: Keep your savings and checking accounts in the same place
It is a myth that it’s always best practice to keep your savings wherever your checking account is. In fact, it is not ideal to “keep all of your money in one main bank,” Ransom-Cooper says, “especially since brick-and-mortar banks typically have very low interest rates when it comes to savings.”
“You’re losing an opportunity to capitalize on some higher interest rates via online banks or just higher-yield savings accounts, in general,” she adds.
Instead, she encourages young professionals to “shop around” for different banks, which might offer various annual compound interest rates or minimum deposit values.
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